S&P 500: 25% of the S&P 500 are ‘dead money’ stocks you probably own

Waiting five years is a long time before you don’t make any money with a stock. But that’s been the case for a surprisingly large portion of the S&P 500 — which explains why so many investors are fed up and willing to ditch stocks for 5% CDs.

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More than a quarter of the stocks currently in the S&P 500, inclusive VF (VFC), DXC technology (DXC) and Carnival (CCL), are lower now than they were five years ago, says an Investor’s Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. Even widely held stocks in the Dow Jones Industrial Average want Walter Disney (DIS) have fallen by nearly 27% over the past five years.

It may come as a surprise to see so many big dead money stocks, given that the value of the S&P 500 itself has risen 55.2% over the past five years. But the fact is, you’ve had a one in four chance of choosing a loser over a winner. If you make the wrong choice, you will not only lag behind the market, but you will also have less money than you started with.

“Hope makes life eternal,” said Robert Maltbie, fund manager of Argonaut 2000 Partners. Only a handful of people have followed the S&P 500 for years, he says.

One in four chance of losing money within five years

If you just look at the S&P 500 itself, the past five years look solid. But when we look deeper into the individual inventory level, a different story is told.

For the entire S&P 500, including dividends, investors have delivered total returns of more than 69% over the past five years ending August, says Howard Silverblatt of S&P Dow Jones Indices. And it’s not just the S&P 500’s gains. The Dow Jones posted a return of 49% and small caps almost 21%. From that perspective, market returns look great.

But this return is almost entirely due to a total return of 135% on major technology stocks at the time. Just ten stocks account for about a third of the value of the S&P 500. Once you look beyond Big Tech, you begin to understand why losing money is so easy.

More than 125 stocks in the S&P 500 are now lower than they were five years ago. And some of those were major exterminations. More than 40% of these have a decrease of 25% or more.

Biggest Five-Year Disaster: VF

A clothing maker of brands like The North Face, Timberland, and JanSport, VF is known for helping customers reach heights. But the stock has only headed in one direction over the past five years: down.

Shares of sustainable consumer stocks are now traded 56% less than five years ago. Even the return of 9.2% cannot mask the huge disappointment. And it’s not just investors who are distorting prices. The foundations of the company are also shrivelling. The company earned just $2.10 per share in fiscal year 2023, more than 44% less than five years ago.

Many ways to lose money

Some S&P 500 stocks have fallen so much that even powerful rallies this year can’t repair the damage.

An example of this is Carnival. Shares of the cruise line are up 96% so far this year. Cruise bookings have surged as fewer people worry about Covid-19. But even after doubling in value this year, Carnival’s shares are still 74% lower than they were five years ago.

However, investors are holding on. Carnival continues to be a widely held stock among investors of all ages. Investors appear to be waiting for the company to return to profitability in fiscal year 2024, as expected.

Hopefully the next five years will be better for investors than the past five years.

‘Dead money’ S&P 500 stocks

Stocks have fallen the most in the past five years

Follow Matt Krantz on Twitter (X) @matkrantz

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